The world leader in serving science Proprietary & Confidential Martin Van Walsum, CPA, MBA, CCP Vice President, Executive Compensation Executive Incentive Compensation in the Private, Small, and Midsized Marketplace CBIA 2016 Compensation & Benefits Conference June 22, 2016
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The world leader in serving science Proprietary & Confidential
Martin Van Walsum, CPA, MBA, CCP
Vice President, Executive Compensation
Executive Incentive Compensation in the Private, Small, and Midsized Marketplace
CBIA 2016 Compensation & Benefits Conference June 22, 2016
2 Proprietary & Confidential
• Revenues of $17 billion and 50,000+ employees in 50 countries
• We help our customers accelerate life sciences research, solve complex
analytical challenges, improve patient diagnostics and increase laboratory
productivity
• Formed by the 2006 merger of Thermo Electron (f. 1956) and Fisher Scientific
(f. 1902)
About Thermo Fisher Scientific
3 Proprietary & Confidential
Our Mission
4 Proprietary & Confidential
About Thermo Fisher Scientific (NYSE: TMO)
• High performing culture built around “making our numbers”
• Have closed 120+ deals in the past 10 years totaling $50+ B, including: Year Company Revenue Purchase Price
2011 Dionex $500 M $2.2 B
2011 Phadia $600 M $3.5 B
2012 One Lambda $200 M $0.9 B
2014 Life Technologies $4.0 B $16 B
2016 Affymetrix $350 M $1.3 B
2017P FEI Corporation $1.0 B $4.3 B
• Rewarded by investors with quadrupled stock price from January 1, 2009 to
December 31, 2016, and 97% favorable vote in 2016 “Say on Pay” referendum
5 Proprietary & Confidential
About Barnes Group (NYSE: B)
• Founded in 1857 in Bristol, Connecticut making springs for clocks and hoop skirts
• Today, $1.2 B global manufacturer of industrial and aerospace components with
approximately 4,700 employees at more than 60 locations on four continents
• Stock price quadrupled from January 1, 2000 to December 31, 2007
6 Proprietary & Confidential
Similarities
• B2B companies large and small suffer from “identity crises”
• Thermo Fisher Scientific – #267 on Forbes’ 2016 list of The
World’s Biggest Public Companies, # 97 in U.S.
• Forbes Inc. – Private Company, $400 M in revenue, 750 employees
• “Cash is King” – remains the most important element
of pay, even among executives making > $1M
• Employees seek differentiated recognition for their
contributions
• Affordability of driving incentives deep in organizations
• Scarcity of resources, especially good people
Differences
• Top talent is easier to accumulate in large caps
(challenge, not a barrier)
• Change isn’t easy, but it’s easier in smaller companies and in
private companies
Small / Private Companies vs. Large Caps
7 Proprietary & Confidential
• Salary
• Merit and Market Adjustments
• Promotional Salary Increases
• Short-Term Incentives
• Quarterly or Semi-Annual in
specific circumstances
• Stock Options
• Non-Qualified
• Incentive Stock Options (ISOs)
• Stock Appreciation Rights (SARs)
• Restricted Stock / Units
• Performance Shares
• Performance Units
• Phantom Stock/ Faux Equity Plans
• Book Value Plans
Incentive Choices for Executives
8 Proprietary & Confidential
Do Don’t
DO differentiate in at least three of the
components of Total Compensation
• Merit Increases, Salary Adjustments,
S/T Incentives, L/T Incentives
DON’T over-reward the same organization
level
• S/T incentives: the business
• L/T incentives: the company
DO use stock, to the extent available.
• The accounting for stock is still better than
cash (value fixed on grant date vs. variable
accounting)
• Options still tend to be less expensive
• If you are successful in creating stock price
appreciation, the linkage can become very
powerful for retention, motivation and
attraction – great story to tell
• Be mindful of overhang and burn rate
DON’T over-interpret “trend data”
• Example: “While the trend of giving bonuses
has steadily increased since 2013 (69%) for
all companies, top performers were more
likely to give bonuses in 2015. The 2016
CBPR found that 74% of average companies
gave bonuses in 2015, while 81% of top
performers gave bonuses in 2015.” 1
DO use metrics for any cash component
that incorporate the drivers of stock price
(or enterprise value for private companies)
DON’T let the finance and legal teams
over-influence incentive design
• Find a way that satisfies all needs
Do’s and Don’t of Incentives for Executives
1 PayScale Human Capital, 2016 Compensation Best Practices Report
9 Proprietary & Confidential
• Any company, regardless of size, can utilize pay as an incentive to reinforce a
performance culture
• Pay cannot create behaviors
• The behaviors have to be innate in the assembled workforce
• Hire to the culture you want to create
• Pay for performance can reinforce those behaviors that already exist
• Focus attention on desired behaviors
• Promote acceptable risk taking
• Opportunities are more powerful than pay
• “The true reward for superior performance is increased responsibility. The money will
follow in the natural course”
• Some behaviors can be expected and don’t need to be reinforced through added